California Walks Two Paths
Sohn, Sung Won, ABA Banking Journal
California's massive economy always has undercurrents going in opposite directions. Up until recently, everything was going California's way. Northern California (the Bay Area especially) was home to a red-hot economy powered by the new internet age. Southern California had overcome the lingering effects of the early 1990s. The only area that wasn't knocking the socks off the economy was the agricultural and commodity dependent Central Valley. The state generated record surpluses thanks to a seemingly endless supply of valuable stock options. The future looked golden for the Golden State.
Then, in 2000, Chairman Greenspan handed the stock market a citation for reckless driving. Hugo Chavez's Venezuela and OPEC closed the spigot to cheap oil. And, California's electrical deregulation chickens came home to roost. The first two shocks threw the national economy off its stride, and the third creates a special challenge for California.
Now, Northern and Southern California are moving in different directions. Northern California's world-class companies struggle to reset their compasses to chart a new path. Or, they have to seriously consider staying the course through what might be a protracted slowdown. They need to ask the question. Will the next "big thing" from the internet revive them or do they need to take a completely different direction?
With the lag time between the basic research and the commercial application shrinking, it is unlikely that Northern California will have to wait long for the new surge to hit. However, from Tel Aviv to Singapore, high tech competitors keep challenging the Bay Area's dominance in the internet and computers. Just because the Bay Area came out on top last time doesn't guarantee the next round.
The slowdown in the north retells the story of Southern California in the early 1990s. A massive slowdown in Federal defense and space spending had knocked out the inflow of high impact dollars. …